Administrative Report

Transcription

1 2014 Administrative Report Encouraging investment in renewable energy Accelerating carbon abatement for Australia

2 Published by the Clean Energy Regulator ISSN Commonwealth of Australia 2015 This work is licensed under the Creative Commons Attribution 3.0 Australia Licence. To view a copy of this licence, see The Clean Energy Regulator asserts the right to be recognised as author of the original material in the following manner: Commonwealth of Australia (Clean Energy Regulator) 2015 This report reflects the efforts of many people. Special thanks to the staff of the Clean Energy Regulator, Renewables and Carbon Farming Division, as well as the following professional service providers: Writing and editing by Cinden Lester Communications Design and typesetting by Papercut Graphic Design Printed by CanPrint Communications Pty Limited This report has been prepared in accordance with the requirements of section 105 of the Renewable Energy (Electricity) Act Contact us Mail GPO Box 621 Canberra ACT 2601 Phone Website if calling within Australia if calling from overseas translating and interpreting service TTY service speak and listen service enquiries@cleanenergyregulator.gov.au More information about the report Enquiries regarding this report may be directed to: Manager, Communications, Engagement and Support Section People and Communications Branch Operations Division Clean Energy Regulator Phone enquiries@cleanenergyregulator.gov.au Photo acknowledgements Hornsby RSL Club AGL Nyngan

3 The Hon Greg Hunt MP Minister for the Environment Parliament House CANBERRA ACT 2600 Dear Minister I am pleased to submit the Renewable Energy Target 2014 Administrative Report. The report covers the operations of the Renewable Energy (Electricity) Act 2000 for the 2014 calendar year. The report is submitted for presentation to the Parliament in accordance with section 105 of the Renewable Energy (Electricity) Act Yours sincerely Chloe Munro Chair, Clean Energy Regulator 28 April 2015 GPO Box 621 Canberra ACT enquiries@cleanenergyregulator.gov.au

4 Contents 1 2 Executive summary 1 Renewable Energy Target at a glance highlights 2 Chair s review 4 Complete data for 2013 Renewable Energy Target electricity generation 6 Achieving the objectives 10 Context 10 Objectives 10 Renewable energy certificates 11 Outcome 11 Legislation 13 Objective 1: Encouraging additional generation of electricity from renewable sources 13 Objective 2: Reducing emissions of greenhouse gases in the electricity sector 20 Objective 3: Ensuring ecologically sustainable renewable energy sources 22 3 Administering the Act 23 Role of the Clean Energy Regulator 23 The REC Registry 23 Case study: Redesigning the REC Registry 24 Creating accounts 26 Becoming a registered person or agent 26 Summary of certificate activity in Client and stakeholder engagement 33 Large-scale systems 34 Case study: Solar success 38 Small-scale systems 43 Case study: Rooftop revolution 45 Liable entities 52 Compliance activities 58 Glossary 62 II Renewable Energy Target 2014 Administrative Report

5 List of figures Figure 1: Renewable energy certificates supply, demand and outcome 12 List of tables Table 1: Certificate activity summary in Table 2: Table 3: Certificates accepted for voluntary surrender from 2007 to 31 December Number of new renewable energy power stations accredited in 2013 and Table 4: Total number of accredited renewable energy power stations 36 Table 5: Table 6: Table 7: Table 8: Number of accredited renewable energy power stations by state as at 31 December Total amount of 2014 partial exemptions given for each emissions-intensive trade-exposed activity as at 31 December Methods used to determine quarter 1 to 3 small-scale technology certificates required surrender amounts 57 Number of final reports for inspections of small generation units received by the Clean Energy Regulator between 1 January and 31 December List of graphs Graph 1: Renewable Energy Target generation profile (megawatt hours) Graph 2: Above and below baseline generation for the Large-scale Renewable Energy Target in Graph 3: Baselines for 2013 generation year by renewable energy source 9 Graph 4: Growth in the number of accredited renewable energy power stations and their capacity, Graph 5: Supply of large-scale renewable electricity generation, Graph 6: Growth in the number of valid small-scale installations since Graph 7: Estimated generation by small generation units and displacement by solar water heaters, Graph 8: Number of certificate transfers by month in 2011, 2012, 2013 and Graph 9: Small-scale technology certificates awaiting sale in the STC Clearing House 30 Graph 10: Small-scale technology certificate secondary market spot price (GST exclusive), Graph 11: Large-scale generation certificates validly created from the start of the scheme, as at 31 December Renewable Energy Target 2014 Administrative Report III

6 Graph 12: Solar power stations with capacities between 100 and 500 kilowatts, Graph 13: Solar panel installations with capacity between 10 and 100 kilowatts, Graph 14: Solar panel installations by state, Graph 15: Small-scale technology certificates validly created from Graph 16: Certificates validated for solar hot water system and air source heat pump installations, Graph 17: Certificates validated for small generation units, Graph 18: Large-scale generation certificates accepted or are available to acquit a mandatory liability for the assessment years from Graph 19: Small-scale technology certificates accepted or are available to acquit a mandatory liability for the assessment years from Graph 20: Summary of cumulative inspections results since the inspections programme was introduced, up to 31 December IV Renewable Energy Target 2014 Administrative Report

7 1 Executive summary Renewable Energy Target at a glance Objectives The Renewable Energy Target encourages investment in renewable energy systems. The objectives are to: encourage the additional generation of electricity from renewable sources reduce emissions of greenhouse gases in the electricity sector, and ensure that renewable energy sources are ecologically sustainable. How it works The Renewable Energy Target creates an incentive for additional generation of electricity from renewable sources. Participants create renewable energy certificates for every megawatt hour of electricity they generate (the supply side). Wholesale purchasers of electricity, mainly electricity retailers, buy these certificates to meet their renewable energy obligations (the demand side). They then surrender these certificates to the Clean Energy Regulator in percentages set by regulation each year. The Clean Energy Regulator administers the Renewable Energy Target s two schemes: the Large-scale Renewable Energy Target, which encourages investment in renewable power stations to achieve gigawatt hours of additional renewable electricity generation by , and the Small-scale Renewable Energy Scheme, which supports small-scale installations like household solar panels and solar hot water systems. The Clean Energy Regulator regulates both the supply and demand to ensure scheme integrity, and provides an online registry to enable the market to operate. Outcome By creating a market-based financial incentive to generate more electricity from renewable sources, the Renewable Energy Target increases renewable energy and, in turn, helps accelerate carbon abatement for Australia. 1 The target of gigawatt hours does not include the additional 850 gigawatt hours annual amount for waste coal mine gas, which is removed from the targets. Renewable Energy Target 2014 Administrative Report 1

8 2014 highlights 46 new accredited renewable energy power stations Total now 440 power stations large-scale generation certificates and small-scale technology certificates surrendered against RET liability 99.9% compliance rate 36.8 million new large-scale and small-scale renewable energy certificates validated million large-scale renewable energy certificates million small-scale technology certificates 4 gigawatt milestone passed for rooftop solar panel capacity Enough to supply electricity for an average households for a year new small-scale systems validated Total now more than 2.2 million 2 Renewable Energy Target 2014 Administrative Report

9 $$ small generation units inspected Redesigned REC Registry released 15 September more registered persons and 68 more registered agents 114 liable entities 164 partial exemption certificates issued Totalling gigawatt hours of partial exemption for 2014 for emissions intensive trade exposed industries 4 liable entity workshops held around the country 1 criminal prosecution for fraud resulting in a custodial sentence 3 enforceable undertakings as a result of investigations Renewable Energy Target 2014 Administrative Report 3

10 Chair s review Year in the spotlight The performance and impact of the Renewable Energy Target was in the spotlight throughout In February, the Government announced the terms of reference of an Expert Panel to review the Renewable Energy Target. The Panel received some submissions and held 200 stakeholder meetings an indication of the level of interest in the Renewable Energy Target and its policy settings. The Clean Energy Regulator contributed factual information on the operation of the scheme, much of which is also published in this annual administrative report. The Panel s report, released in August 2014, found that the Renewable Energy Target has largely met its objectives and that consultations indicated the administration of the Renewable Energy Target scheme is generally efficient and meets the expectations of most stakeholders. However, the Panel recommended reforming the Renewable Energy Target on other grounds. The Climate Change Authority published its second statutory review of the Renewable Energy Target in December, presenting another perspective. Options for amending the scheme remain under consideration. Objectives achieved Regardless of the policy debate during 2014, the Renewable Energy Target continued to operate according to its objectives. A total of 36.8 million renewable energy certificates were validly created in 2014, representing 36.8 million megawatt hours of additional electricity generated from ecologically sustainable sources or no longer required from the grid. Improvements made Administrative processes continued to operate smoothly and some significant improvements were made. For example, the redesigned Renewable Energy Certificate Registry (REC Registry), released in September 2014, provides a more streamlined and responsive facility for participants to create, trade and surrender renewable energy certificates. As a result the average time for validation of small-scale technology certificates reduced from 16 to five days. 4 Renewable Energy Target 2014 Administrative Report

11 Highlights and trends The Large-scale Energy Target experienced a slow-down in investment wind farm accreditations, which had been increasing since 2010, fell for the first time in In contrast, there was an increase in accreditations of large-scale solar power plants, with technology developments improving solar s economic competitiveness at the utility scale. The Small-scale Renewable Energy Scheme experienced greater stability during 2014, with fewer changes to state-based incentives than in past years. A year of steady growth saw small-scale installations surpass the 2.2 million milestone by the end of In particular, there was strong growth in solar panel installations at the higher end of the Small-scale Renewable Energy Scheme as an increasing number of small to medium businesses joined householders in using solar panels to reduce their electricity costs. Safety and compliance Each year the Clean Energy Regulator is funded to inspect a sample of small generation units to verify their compliance with the requirements to receive small-scale technology certificates. More than small-scale systems were able to be inspected in The overall percentage of unsafe or substandard installations has fallen since the start of the small-scale inspections program in Four power stations were inspected in 2014 and found to be compliant with the legislation. There was also a steady and diligent approach to liable entity compliance during the year, with liable entities recording a 99.9 per cent compliance rate for meeting their renewable energy obligations by surrendering renewable energy certificates. Strong performance The outcomes of the 2014 calendar year demonstrate the Renewable Energy Target continues to operate effectively as a market-based instrument to support investment in renewable energy systems. Chloe Munro Chair, Clean Energy Regulator Renewable Energy Target 2014 Administrative Report 5

12 Complete data for 2013 Renewable Energy Target electricity generation Renewable energy certificates can be created up to 12 months after small-scale systems are installed or by 31 December the year after the electricity was generated by power stations. As a result, the following complete 2013 generation year data is available to report this year. Snapshot of 2013 generation: megawatt hours generated by the Small-scale Renewable Energy Scheme megawatt hours displaced (electricity no longer required from the grid) by the Small-scale Renewable Energy Scheme megawatt hours of additional generation by the Large-scale Renewable Energy Target 22.6 million megawatt hours in % LARGE-scale 29% small-scale In 2013, the total new renewable electricity generated or displaced under the Renewable Energy Target was 22.6 million megawatt hours. The Large-scale Renewable Energy Target contributed 71 per cent and the Small-scale Renewable Energy Scheme contributed 29 per cent. There was a record level of additional electricity from hydro during the year. 6 Renewable Energy Target 2014 Administrative Report

13 Graph 1: Renewable Energy Target generation profile (megawatt hours) 2013 SRES Hydro Landfill gas Wind Solar Waste coal mine gas Biomass* SRES solar water heaters (deemed)^ SRES solar panels (deemed)^ SRES = Small-scale Renewable Energy Scheme * Biomass includes food waste, food processing waste, agricultural waste, wood waste, sewage gas and biomass based components of sewage, energy crops, waste from processing of agricultural products and biomass based components of municipal solid waste, bagasse, bagasse co-generation, biomass-based components of municipal solid waste, energy crops, wood waste and black liquor. ^ Denotes estimated generation/displacement from the Small-Scale Renewable Energy Scheme. Estimates are based on capacity, deeming methodology and postcode ratings by state. Graph 1 shows the breakdown against different renewable energy sources. In addition, below baseline (capacity in existence when the scheme started) generation in the Large-scale Renewable Energy Target was 14.6 million megawatt hours for 2013 (see Graph 2). Accredited power stations can create certificates for electricity generated above their renewable power baselines (baselines are explained on page 40). Renewable Energy Target 2014 Administrative Report 7

14 Graph 2: Above and below baseline generation for the Large-scale Renewable Energy Target in 2013 Below baseline generation in megawatt hours Above baseline generation In megawatt hours Note: This is for the 2013 calendar year, and not all power stations created large-scale generation certificates for all their eligible generation. Figures shown have been rounded. Graph 2 shows the megawatt hours generated by power stations with baselines, both before they reached the baseline (below baseline) and after they reached the baseline (above baseline). Total generation under the Large-scale Renewable Energy Target is approximately 31 million megawatt hours, including above and below baseline generation. 8 Renewable Energy Target 2014 Administrative Report

15 Graph 3: Baselines for 2013 generation year by renewable energy source Landfill gas Other Bagasse Hydro Total baseline: megawatt hours Note: This is the maximum theoretical baseline for the 2013 calendar year for accredited Renewable Energy Target power stations. Hydro accounts for AROund 94% of the baseline Graph 3 shows the baselines by renewable energy source. Hydro accounts for almost 94 per cent of the baseline, as most of the hydro power stations were generating electricity before 1997 and were therefore accredited with a renewable energy power baseline. Renewable Energy Target 2014 Administrative Report 9

16 2 Achieving the objectives Context Electricity generation accounts for around one-third of Australia s greenhouse gas emissions. Recognising the important role of renewable energy in reducing emissions, Australia introduced the Renewable Energy Target in Originally the target was to source two per cent of the nation s electricity from renewable sources. In 2009, this increased to gigawatt hours by In January 2011 the Renewable Energy Target was split into two parts: Large-scale Renewable Energy Target this scheme creates a financial incentive to establish and expand renewable power stations such as solar farms, wind farms and hydro-electric power stations. It delivers the majority of the 2020 target (see page 34). Small-scale Renewable Energy Scheme this scheme creates a financial incentive to install small generation units (solar panels, wind or hydro systems) and solar water heaters (including air source heat pumps) (see page 43). The Clean Energy Regulator manages these schemes as part of its purpose of accelerating carbon abatement for Australia. Objectives The objectives, as set out in the Renewable Energy (Electricity) Act 2000, are to: encourage the additional generation of electricity from renewable sources (see page 13) reduce emissions of greenhouse gases in the electricity sector (see page 20), and ensure that renewable energy sources are ecologically sustainable (see page 22). The Renewable Energy Target is achieving these objectives by stimulating investment in renewable power stations and increasing the number of small-scale renewable energy systems such as rooftop solar panels and solar water heaters. To date, 440 power stations have been accredited and more than 2.2 million small-scale systems installed. Based on current demand forecasts (which take into account a decline in electricity demand not anticipated when the target was set), the target of gigawatt hours is likely to represent around 27 per cent of the Australian electricity market in Renewable Energy Target 2014 Administrative Report

17 Renewable energy certificates The Renewable Energy Target works by creating a market for renewable energy certificates. Accredited renewable energy power stations can create large-scale generation certificates. One large-scale generation certificate is equivalent to one megawatt hour of eligible renewable electricity generated above the power station s renewable power baseline. Owners of small-scale renewable energy systems can create (or assign their right to create) small-scale technology certificates for eligible solar water heaters, air source heat pumps, and small-scale solar panel, wind and hydro systems. One small-scale technology certificate is equivalent to one megawatt hour of renewable electricity generated by small-scale solar, wind or hydro systems, or electricity displaced (no longer required from the grid) by solar water heaters or air source heat pumps. The market for certificates The creation of large-scale and small-scale renewable energy certificates creates the supply side of the market. The Renewable Energy (Electricity) Act 2000 requires liable entities (usually electricity retailers) to source renewable energy certificates. This creates the demand side of the market. To meet their obligation, liable entities purchase and surrender a certain number of renewable energy certificates to the Clean Energy Regulator each year, or pay a shortfall charge. More details about liable entities are on page 52. There is also a secondary market for certificates that does not involve the Clean Energy Regulator, and includes financial institutions, traders, agents and installers. This secondary market has matured since 2001 and is quoted on a range of trading platforms. The Clean Energy Regulator liaises with market participants to help them understand the workings of the scheme and ensure an efficient market for renewable energy certificates. More details about stakeholder and client engagement are on page 33. More details about certificate activity in 2014 are on page 27. Outcome The Renewable Energy Target creates a market-based financial incentive to generate additional electricity from renewable sources, reduce greenhouse gas emissions, and ensures renewable energy sources are sustainable. In doing so, the Renewable Energy Target helps accelerate carbon abatement for Australia. Renewable Energy Target 2014 Administrative Report 11

18 Figure 1: Renewable energy certificates supply, demand and outcome SUPPLY TRANSACTIONS DEMAND Certificate creation REC Registry Renewable energy certificate $$ Certificate surrender ELIGIBLE PARTIES Large-scale generation Less partial exemption certificates LIABLE ENTITIES Small-scale generation Secondary market Energy acquisitions STC Clearing House Small-scale technology certificate $$ REC Registry = an online system for Renewable Energy Target transactions including transfer of certificates STC Clearing House = a facility in the REC Registry for the sale of small-scale technology certificates at a fixed price 12 Renewable Energy Target 2014 Administrative Report

19 Legislation The Renewable Energy Target schemes are underpinned by legislation: The Renewable Energy (Electricity) Act 2000 sets out the aims of the schemes including the annual targets, creates liabilities, provides for registration of persons and accreditation of power stations, and establishes the market for renewable energy certificates. The Renewable Energy (Electricity) (Large-scale Generation Shortfall Charge) Act 2000 provides the rate of charge for the applicable renewable energy shortfall charge for the Large-scale Renewable Energy Target. The Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Act 2010 provides the rate of charge for the applicable renewable energy shortfall charge for the Small-scale Renewable Energy Scheme. The Renewable Energy (Electricity) Regulations 2001 provide details on a number of issues, including eligibility criteria for renewable energy sources and criteria for accreditation of power stations and small-scale systems. Objective 1 Encouraging additional generation of electricity from renewable sources In 2014 the Renewable Energy Target achieved the objective of generating additional electricity from renewable sources with: 46 new accredited renewable power stations million large-scale generation certificates validly created reflecting million megawatt hours of additional renewable electricity generated new small-scale system installations, and million small-scale technology certificates validly created for systems raising the capacity of small-scale systems to generate or displace around 7.6 million megawatt hours of renewable electricity annually. Renewable Energy Target 2014 Administrative Report 13

20 Large-scale systems Steady increase The number of renewable energy power stations accredited under the Large-scale Renewable Energy Target has increased each year since In 2014 there were 46 new accredited power stations, bringing the total number of accredited power stations to 440 by 31 December new accredited renewable energy power STATIOns in 2014 In recent years cumulative capacity has grown at a slower rate than accredited power stations, showing a trend towards a large number of smaller renewable power stations. This trend is more pronounced between 2013 and Graph 4: Growth in the number of accredited renewable energy power stations and their capacity, Number of power stations Capacity in megawatts Cumulative number of power stations Cumulative capacity (megawatts) Note: Total capacity excludes seven co-firing power stations (combustion of fossil and renewable fuels in the same system). 14 Renewable Energy Target 2014 Administrative Report

21 Energy sources The Clean Energy Regulator categorises accredited power stations according to the renewable energy source used to create most of the station s large-scale generation certificates. The 440 accredited power stations fall into 12 out of 19 eligible categories and include 107 hydro, 99 solar, 82 wind and 62 landfill gas power stations. The remaining 90 stations use other renewable energy sources. Details are in Table 4 on page 36. Large-scale capacity In 2014 a total of million large-scale renewable energy certificates were validly created reflecting million megawatt hours of additional renewable electricity generated. This is a 24 per cent increase from 2013 when million large-scale renewable energy certificates were validly created. At the time of writing, the capacity of accredited renewable energy power stations was approximately megawatts. 2 These power stations can generate around 16 million megawatt hours of renewable electricity in a typical year. This is enough to power more than 2.5 million average Australian households. 3 The calculation of 16 million megawatt hours of renewable electricity considers variables such as rainfall in catchments for hydro power station storage dams and other weather that may affect capacity to generate electricity. Large-scale annual targets The Renewable Energy (Electricity) Act 2000 specifies the amount of renewable energy that liable entities are required to source in the form of large-scale generation certificates each year up to This renewable power percentage changes each year as the legislated annual targets increase to reach the target of gigawatt hours by Power percentages are explained on page This is lower than the megawatts reported in 2013 as the figure has been corrected to exclude co-firing power stations. 3 Based on average household electricity consumption of kilowatt hours per week. Australian Bureau of Statistics, Household Energy Consumption Survey, Australia: Summary of Results, viewed 1 March 2014, < ausstats/abs@.nsf/lookup/by%20subject/4670.0~2012~main%20features~dwelling%20characteristics~10005>. Renewable Energy Target 2014 Administrative Report 15

22 Graph 5: Supply of large-scale renewable electricity generation, Megawatt hours Generation year Biomass* Landfill gas Solar Wind Hydro Waste coal mine gas Estimated forecast of LGCs LGCs = Large-scale generation certificates Note: This graph is up to 31 December Certificates can be created up to 12 months after the year the electricity was generated by the power stations, and as such the 2014 data is an estimated forecast only. * Biomass includes food waste, food processing waste, agricultural waste, wood waste, sewage gas and biomass based components of sewage, energy crops, waste from processing of agricultural products and biomass based components of municipal solid waste, bagasse, bagasse co-generation, biomass-based components of municipal solid waste, energy crops, wood waste and black liquor. As illustrated in Graph 5, large-scale renewable electricity generation has increased since the introduction of the Renewable Energy Target in The graph shows the amount of renewable electricity generated above accredited power stations renewable power baselines. Baselines are explained on page Renewable Energy Target 2014 Administrative Report

23 Small-scale systems Steady increase The number of small-scale installations under the Small-scale Renewable Energy Scheme has increased each year since In 2014 a total of small-scale systems were installed, bringing the overall number of installations to by 31 December new small-scale systems installed in 2014 Graph 6: Growth in the number of valid small-scale installations since Number of installations Year Total Note: Certificates can be created up to 12 months after small-scale systems are installed, which means the complete 2014 year data will be available in next year s report. 4 The final figure for 2014 installations will be available in next year s report, as certificates can be created up to 12 months after installation. Renewable Energy Target 2014 Administrative Report 17

24 Small-scale capacity In 2014, a total of small-scale technology certificates were validly created for small-scale installations. 5 The estimated amount of renewable electricity generated or displaced by small-scale systems has increased steadily since Over 18.7 million small-scale technology certificates CREATEd for systems Displaced refers to the estimated reduced demand for electricity from the grid after solar water heaters are installed (that is, solar hot water systems or air source heat pumps). Graph 7 illustrates the estimated increase in small-scale capacity from the three main contributors: generation from small-scale solar panel systems, and displacement from solar water heaters and air source heat pumps. Graph 7: Estimated generation by small generation units and displacement by solar water heaters, Megawatt hours Generation Displacement Note: Certificates can be created up to 12 months after small-scale systems are installed, which means the complete 2014 year data will be available in next year s report. 5 The final figure for 2014-related certificates will be available in next year s report, as certificates can be created up to 12 months after installation. 18 Renewable Energy Target 2014 Administrative Report

25 In total, small-scale installations have the capacity to generate or displace approximately 7.6 million megawatt hours of electricity annually. Of this, approximately 4.8 million megawatt hours are from small generation units (small-scale solar, wind or hydro installations), with solar water heaters displacing a further 2.8 million megawatt hours of otherwise-required generation. Generation and displacement for 2014 will continue to rise as certificates can be created up to 12 months after installation review findings The Government s 2014 review of the Renewable Energy Target by the Expert Panel, including ACIL Allen Modelling, found that: renewable generation accounts for an estimated 16.1 per cent of generation (at the end of calendar year 2014) where the RET remains unchanged, renewable energy is projected to reach 26.3 per cent by The 2014 Expert Panel found that the Renewable Energy Target: has encouraged significant renewable electricity generation, which has almost doubled as a result of the scheme. Installations of small-scale systems have exceeded expectations, with output from these systems already exceeding levels anticipated for ACIL Allen Consulting, RET Review Modelling: Market Modelling of various RET policy options, August 2014, viewed 19 February 2015, < 7 Expert Panel, Renewable Energy Target Scheme Report of the Expert Panel, August 2014, viewed 18 February 2015, < Renewable Energy Target 2014 Administrative Report 19

26 Objective 2 Reducing emissions of greenhouse gases in the electricity sector In 2014 the Renewable Energy Target was found to have achieved the objective of reducing greenhouse gases in the electricity sector: the Expert Panel 2014 review of the Renewable Energy Target found it had delivered a modest level of emissions reductions, and the Climate Change Authority 2014 review found the Renewable Energy Target was effective at reducing emissions. Expert Panel review The Government s 2014 review of the Renewable Energy Target by the Expert Panel found that it has delivered a modest level of emissions reductions. To estimate the reduction in emissions out to 2030 as a result of the Renewable Energy Target, the Expert Panel drew on modelling analysis from ACIL Allen Consulting. The modelling compared annual carbon dioxide equivalent (CO 2 -e) emissions in the modelled electricity grids with the Renewable Energy Target as it is currently legislated, and if it was repealed from 1 January The report stated: Repealing the RET is estimated to lead to an increase in annual emissions of about 24 Mt [million tonnes] CO 2 -e from 2020 to Cumulative emissions would increase by 58 Mt CO 2 -e over the period 2015 to 2020 and by 299 Mt CO 2 -e over the period 2015 to Climate Change Authority review The Climate Change Authority s legislated review of the Renewable Energy Target in 2014 drew on its own 2012 review and the ACIL Allen modelling undertaken as part of the 2014 Expert Panel review. It found that the Renewable Energy Target: arrangements were envisaged to deliver at least 20 per cent of Australia s electricity from renewable sources by 2020 and are projected to reduce Australia s emissions by 58 million tonnes of carbon dioxide equivalent (Mt CO 2 -e) over , and by much larger amounts in later periods. 9 8 Expert Panel, Renewable Energy Target Scheme Report of the Expert Panel, August 2014, p. 41 viewed 26 February 2015, < 9 Climate Change Authority, Renewable Energy Target Review, December 2014, Summary, viewed 18 February 2015, < 20 Renewable Energy Target 2014 Administrative Report

27 It commented that the Renewable Energy Target arrangements: are not perfect but, in the Authority s view, they are effective in reducing emissions (at reasonable cost) in the centrally important electricity sector. 10 Sinclair Knight Merz (SKM) estimated historical emissions reductions from 2001 to 2012 as a result of Renewable Energy Target, for the Clean Energy Council. SKM s report stated: The uptake of renewable energy generation over the last 10 years has reduced emissions by approximately 23 Mt CO 2 -e [carbon dioxide equivalent]. The Renewable Energy Target itself is responsible for around 20 Mt CO 2 -e or approximately 90% of this estimated electricity market emission reduction. 11 Australian Energy Regulator report Falling demand for electricity is one of several factors impacting emissions in the electricity sector. In its report State of the Energy Market 2014, the Australian Energy Regulator observed that electricity demand continued to decline in One of the reasons cited was: the continued rise in rooftop solar photovoltaic (PV) generation, which reduces consumption of electricity sourced from the grid. In solar PV generation reduced grid consumption by 2.9 per cent. This growth has been driven by small scale renewable energy certificates and lower cost systems. 12 Changing the electricity generation mix The Renewable Energy Target increases the amount of renewable electricity in Australia s electricity generation mix. This means less generation from coal and other fossil fuel based electricity generators, thereby lowering overall emissions from Australia s electricity sector. To meet Australia s target of reducing greenhouse gas emissions by five per cent by 2020 (to below 1990 levels), an extra 58 million tonnes of emissions abatement from other sectors 13 is needed from 2015 to Both the Government s 2014 review and the 2014 Climate Change Authority review forecast emission reductions of around 300 million tonnes owing to the Renewable Energy Target in the decade 2020 to ibid. 11 Sinclair Knight Merz, Benefit of the Renewable Energy Target to Australia s Energy Markets and Economy, August 2012, viewed 5 March 2015, < 12 Australian Energy Regulator, State of the Energy Market 2014, December 2014, viewed 18 February 2015, < 13 Climate Change Authority, Renewable Energy Target Review, December 2014, Summary, viewed 18 February 2015, < Renewable Energy Target 2014 Administrative Report 21

28 Objective 3 Ensuring ecologically sustainable renewable energy sources In 2014 the Renewable Energy Target achieved the objective of ensuring ecologically sustainable renewable energy sources: 36.8 million renewable energy certificates were validated these must meet several criteria including ecologically sustainable sources, and accredited power stations used 12 different types of renewable energy sources including ecologically sustainable solar energy, wind, hydro, biomass (such as wood waste, agricultural waste and sugar cane waste, known as bagasse) and biogas (landfill gas, sewage gas and biomassbased components of sewage). Commonwealth, state and territory environmental regulation provides a framework for ensuring the Renewable Energy Target promotes the use of ecologically sustainable renewable energy sources. 14 For an energy source to be eligible for renewable energy certificates it must meet several criteria, including that it is ecologically sustainable. Section 17 of the Renewable Energy (Electricity) Act 2000 lists 19 renewable energy sources considered to be ecologically sustainable, and therefore eligible for the creation of renewable energy certificates. The main types are: biomass sources that use vegetable and animal-derived organic material such as wood waste, agricultural waste, food processing waste or bagasse (a residue from sugar cane milling) to fuel engines or biomass boilers, excluding fossilised biomass landfill gas sources that harness methane emitted from landfills (mainly solid wastes and industrial wastes) to fuel engines or steam turbines solar power sources that use sunlight to heat air, water or other fluids to drive turbines or convert solar radiation into electricity through photovoltaic cells wind sources that harness wind currents to drive turbines, and hydroelectric sources that harness kinetic energy from reservoirs, rivers, streams or waterfalls to drive turbines. In addition, the Renewable Energy (Electricity) Regulations 2001 set out specific eligibility requirements for other energy sources, such as waste coal mine gas, which are considered ecologically sustainable under certain conditions. 14 Expert Panel, Renewable Energy Target Scheme Report of the Expert Panel, August 2014, p. ii, viewed 26 February 2015, < 22 Renewable Energy Target 2014 Administrative Report

29 3 Administering the Act Role of the Clean Energy Regulator The Clean Energy Regulator administers the Renewable Energy Target in line with its objectives: efficient and effective administration; engaged, active and compliant clients; a trusted, relevant and expert institution; and secure and enduring infrastructure. It provides the supporting structure for the Renewable Energy Target including facilities for registering and trading renewable energy certificates, and ongoing stakeholder and client liaison, education and compliance activities to help ensure the efficiency and integrity of the market. The Government s 2014 review of the Renewable Energy Target by the Expert Panel found that the administration of the Renewable Energy Target is generally efficient and meets the expectations of stakeholders. 15 The REC Registry The REC Registry is the secure web-based system for all transactions under the Renewable Energy Target including creating, registering, selling, trading and surrendering certificates. The REC Registry also provides The new REC Registry is more user-friendly, responsive and efficient access to several public registers that contain data about the Renewable Energy Target. It was first released in 2001 and enhanced in 2011 to reflect the split into the Large-scale Renewable Energy Target and the Small-scale Renewable Energy Scheme. To ensure the system continues to evolve and mature with the scheme, reflect emerging technologies and meet user requirements, the Clean Energy Regulator released a new, redesigned REC Registry in September It is more user-friendly, more responsive during peak periods and more efficient, with many offline processes moving online. More details are in the case study on page 24. The Clean Energy Regulator does not oversee transfer or payment arrangements for certificates transferred through the REC Registry. Buyers and sellers negotiate this directly as per the business contracts they sign. The Clean Energy Regulator does not regulate certificate prices. This process is market-driven, with the price of certificates determined by factors including supply and demand. 15 Expert Panel, Renewable Energy Target Scheme Report of the Expert Panel, August 2014, viewed 18 February 2015, < Renewable Energy Target 2014 Administrative Report 23

30 CASE STudY Redesigning the REC Registry If solar panels, wind turbines and hydro pipelines are the public face of the Renewable Energy Target, the REC Registry is the essential backroom support. All transactions under the Renewable Energy Target are completed in the REC Registry: on average some transactions a day. This includes participants creating, transferring and surrendering renewable energy certificates. Clean Energy Regulator staff also use the REC Registry as an essential business tool in administering the scheme, for example to assess applications submitted online by participants and to efficiently validate large numbers of certificates. Since its first release in 2001, the REC Registry has supported around 5.5 million transactions. It is available 24-hours-a-day, seven-days-a-week to its account holders. To keep pace with these requirements, the maturing of the scheme and emerging technologies, a completely redesigned REC Registry was released on 15 September Critical improvements Detailed stakeholder and client consultation informed the redesign, which began in 2012 after an open tender process. The new system features critical improvements to functionality and useability. The changes have reduced the administrative burden for scheme participants and improved the efficiency with which the Clean Energy Regulator administers key aspects of the Renewable Energy Target. The improved REC Registry is helping to maintain the smooth operation and integrity of the Renewable Energy Target. 24 Renewable Energy Target 2014 Administrative Report

31 Key benefits The design is more intuitive and includes built-in guidance for each function, making it easier to use. It is more streamlined and efficient, with extra processes coming online for example, end-to-end account application processes and annual returns for some 440 power stations and 114 liable entities. It is more responsive and reliable during peak times. There is better access to certificate data for data analysts, via the public registers. A range of additional features benefit all users for example, enhanced user management, certificate activity log and certificate tagging. It enables efficient collection of statutory fees for creation and surrender of certificates, reducing the cost of participating in the Renewable Energy Target schemes. It provides important updates to registered users and allows users to configure the types of s that they would like to receive. Positive feedback The response has been positive, as encapsulated by these comments: The new REC Registry has been a great improvement overall to stakeholders, providing greater integration and processing ability, easy usability and resulting in a more efficient processing of small-scale technology certificate applications for market. Daniel Sullivan, FormBay Registered Agent under the Small-scale Renewable Energy Scheme As a major user of the REC registry, EDL is extremely satisfied with the change process and welcomes the new functionality of the redesigned REC registry. The transition to the new registry was seamless, well communicated and ensured EDL was able to continue its processes without interruptions. The new functionality, such as point-in-time summaries, makes it a lot easier for us to reconcile the number of certificates at any given time. Another great improvement was the enhancements to the certificate activity log, which provides us a faster and more convenient way to monitor transfers. Tim Sprey, Manager Corporate and Commercial Affairs, Energy Developments Limited (EDL) Participant under the Large-scale Renewable Energy Target Renewable Energy Target 2014 Administrative Report 25

32 Creating accounts Individuals and companies need to create an account to use the REC Registry. This enables them to create and transfer (trade) or surrender registered certificates. Small-scale technology certificates may be sold through the open market or through the Small-scale Technology Certificate Clearing House (STC Clearing House), a facility available through the REC Registry. To sell through the STC Clearing House, account holders must register with the STC Clearing House and provide proof of identity. More details on the STC Clearing House are on page 29. The Renewable Energy (Electricity) Act 2000 allows for large-scale generation certificates and small-scale technology certificates to be electronically transferred between REC Registry account holders (usually between eligible parties and liable entities). Transfers are reported automatically to the Clean Energy Regulator in the REC Registry under section 28 of the Act. Becoming a registered person or agent To create certificates, individuals and companies must apply to become a registered person as defined under the Renewable Energy (Electricity) Act A registered person may: seek accreditation of a renewable energy power station and, if the application is successful, become the nominated person for that power station create large-scale generation certificates for an accredited renewable energy power station, as the nominated person for that power station apply for registration as an agent owners of eligible small-scale systems can assign the right to create certificates for that system to agents (individuals or companies), and create small-scale technology certificates for an eligible small-scale system, as the owner or agent for that system. During 2014, the Clean Energy Regulator: approved 143 registered person applications, bringing the total number of registered persons to as at 31 December 2014, and registered 68 agents, bringing the total number of registered agents to as at 31 December registered persons and 68 registered agents in 2014 Agents include retailers, installers and traders. Agents take responsibility for small-scale technology certificates and provide small-scale system owners with a financial benefit, such as a discount on the price of the installation. Small-scale system owners assign their right to create certificates to the agent after the system has been installed and demonstrated to be working. 26 Renewable Energy Target 2014 Administrative Report

33 Summary of certificate activity for 2014 Table 1 summarises the range of activities during the year for both large-scale generation certificates and small-scale technology certificates. Table 1: Certificate activity summary for 2014 Certificate activity Large-scale generation certificates Small-scale technology certificates Created Failed validation audit Passed validation audit Registered Transferred successfully Entered STC Clearing House Not applicable Transferred successfully in STC Clearing House Not applicable Withdrawn from STC Clearing House Not applicable Bought from STC Clearing House Not applicable Certificates accepted or are available to acquit mandatory surrender obligations Accepted for voluntary surrender Certificates validly created for previous generation years can be audited, registered and surrendered in Transfer of certificates From 2001 to 31 December 2014, an accumulated total of successful certificate transfers had taken place in the REC Registry, representing a total of certificates transferred. Of this overall total, during 2014 there were: accepted transfers, representing a volume of certificates 289 transfers cancelled by sellers, representing a volume of certificates, and 44 transfers rejected by buyers, representing a volume of certificates. Transfer trends Graph 8 shows monthly trends in transfers over the past four years. The busiest transfer months are January and February, linked to the annual liability in the Large-scale Renewable Energy Target. Renewable Energy Target 2014 Administrative Report 27